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Conference Call Discussing Earnings for Fiscal 2012 Third Quarter Results

Safe Harbor

This transcript of an earnings call contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or “Exchange Act,” and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements are not based on historical fact, but are based upon numerous assumptions about future conditions that may not occur. Forward-looking statements are generally identifiable by use of forward-looking words such as “may,” “should,” “intend,” “estimate,” “will,” “potential,” “could,” “believe,” “expect,” “anticipate,” “project,” and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. Forward-looking statements are made based upon information that is currently available or management’s current expectations and beliefs concerning future developments and their potential effects upon us, speak only as of the date hereof, and are subject to certain risks and uncertainties. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements. Our ability to consummate such transactions and achieve such events or results is subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, the matters set forth below:
  • we offer a comprehensive set of solutions—the bundling of our direct IT sales, professional services and financing with our proprietary software, and may encounter some of the challenges, risks, difficulties and uncertainties frequently faced by similar companies, such as: 
    • managing a diverse product set of solutions in highly competitive markets;
    • increasing the total number of customers utilizing bundled solutions by up-selling within our customer base and gaining new customers
    • adapting to meet changes in markets and competitive developments
    • maintaining and increasing advanced professional services by retaining highly skilled personnel and vendor certifications
    • integrating with external IT systems, including those of our customers and vendors; and continuing to enhance our proprietary software and update our technology infrastructure to remain competitive in the marketplace.
  • our ability to hire and retain sufficient qualified personnel;
  • a decrease in the capital spending budgets of our customers or purchases from us; 
    our ability to protect our intellectual property;
  • the creditworthiness of our customers and our ability to reserve adequately for credit losses;
  • the possibility of goodwill impairment charges in the future;
  • uncertainty and volatility in the global economy and financial markets;
  • changes in the IT industry;
  • our ability to raise capital, maintain or increase as needed our line of credit or floor planning facilities, or obtain non-recourse financing for our transactions;
  • our ability to realize our investment in leased equipment;
  • significant adverse changes in, reductions in, or losses of relationships with major customers or vendors; and
  • significant changes in accounting guidance related to the financial reporting of leases; which could impact the demand for our leasing services.

We cannot be certain that our business strategy will be successful or that we will successfully address these and other challenges, risks and uncertainties. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in the Form 10-K for the year ended March 31, 2011 and form 10-Q for the period ended September 30, 2011, as well as other reports that we file with the SEC.

February 6, 2012

Prepared Remarks
Good day, ladies and gentlemen, and welcome to the ePlus Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce our host for today's conference Kley Parkhurst, Senior Vice President.
Kley Parkhurst, Senior Vice President
Thank you Jaron and thank you everyone for joining us today. With me today are Phil Norton, Chairman, President and CEO of ePlus; Elaine Marion, our Chief Financial Officer; and Erica Stoecker, our General Counsel.
I want to take a moment to remind you that the statements we make this morning that are not historical facts may be deemed to be forward-looking statements and are based on management's current plans, estimates, and projections. Actual and anticipated future results may vary materially due to certain risks and uncertainties detailed in the earnings release we issued this morning, and our periodic filings with the Securities & Exchange Commission including our form 10-K for the fiscal year ended March 31, 2011, our form 10-Q for the quarter ended September 30, 2011, and our 10-Q for the period ended December 31, 2011, which should be filed on or around February 6, 2012. The Company undertakes no responsibility to update any of these forward-looking statements in light of new information or future events.
With that I will turn the call over to Phil Norton. Phil?
Phillip G. Norton, Chairman, CEO and President
Thank you, Kley. We reported another solid revenue gain in the quarter ended December 31, 2011, which is the third quarter of our fiscal year 2012. Total revenue increased 18.5% over the prior year, as customer demand for advanced IT solutions, products and services continued to be healthy. The revenue gain in sales of products and services was driven by demand growth from existing customers, gaining new customers, the investments we have made over the past twelve months in acquisitions, opening new offices and developing new solutions, and our adoption of new revenue recognition guidance.
We are pleased to see the investments the Company has made the past year starting to drive positive results. Our focus remains on building recurring revenue streams with multi-faceted managed services, which build on our strengths in staff augmentation, video, collaboration, and security, and allow us to capture the increased demand for advanced IT solutions. We continue to execute our growth strategy by aggressively investing in people, expanding into new geographies, broadening our solution set, and making selective acquisitions.
In the past twelve months, through organic growth and acquisitions, we added 65 net new employees, and expanded our reach in Rochester, New York, the Tidewater area of Virginia, southern California, Richmond Virginia, New Hampshire, Chicago, and Texas. Most of the additional staff are experienced sales professionals with proven customer-facing, revenue-producing sales performance, and highly experienced IT engineers. We have also added new solution sets and gained more than 400 new customer accounts through three acquisitions. On the solutions side, we have significantly expanded and improved our Managed Services capabilities to , offer a broader range of services.
On the acquisition front, most recently, we acquired Vanticore LLC on January 6, 2012. VantiCore is a Cisco-focused solutions provider headquartered in Bedford, New Hampshire. Vanticore’s expertise in Advanced Unified Communications , Collaboration, and Customer Contact Center solutions are an excellent complement to our existing unified communications, , Data Center, and Managed Services practices. These solutions enrich ePlus’ existing suite of integrated offerings and top Cisco certifications. We gained increased market presence in New England as well, and are strategically positioned to provide the highest level of service to customers in Vermont, Maine, New Hampshire, and Massachusetts. Similarly, prior acquisitions such as NCC in June 2011, brought us a security specialization, a security operations center extending our managed services offerings, and a new Chicago area location; while ITI, in November 2010, added the Tandberg Platinum Certification, which we can use nationwide, plus a new southern New Jersey location.
Now, turning to the demand environment, while the IT market has grown this year, it has been accompanied by competitive pricing, and somewhat reduced vendor incentives which reduced gross margin about 70 basis points year over year in our technology business unit. But as a result of our recent acquisitions and investments, on a sequential basis, the trend has turned this quarter as gross margins increased by almost 100 basis points to 14.8%, as compared to the September quarter. Our strategy is to continue to improve our gross margins by selling more of our advanced technology solutions, such as managed services, security, cloud enablement and video.
We also remain focused on continuing to strengthen our relationship with Tier 1 manufacturers such as Cisco, HP, VMware, IBM, NetApp, EMC, Oracle, Microsoft, Apple and Dell as being a multi-line VAR enables us to best serve our customers in the emerging world of today's cloud computing and multi-vendor stacked solutions.
In the financing business, despite challenging market conditions the past year, we are pleased to report an improvement in revenues and earnings in the segment. As a result of an increase in the net gain on sales of leases, notes and leased equipment, revenues increased 9.9%, and pretax earnings increased 25.7% on a year-over-year basis. The size of our lease portfolio was stable year-over-year as we were able to originate leases to maintain our portfolio.
We remain focused on originating financing transactions in two sectors, healthcare and federal government contractors. This business segment, which in the quarter consisted of about 4% of our total revenue, is subject to earnings variability due to high margin transactions, which may or may not be consummated during a given quarter. These transactions may include certain sales of leases and notes, and residual realization as we optimize our portfolio mix.
We are one of a few third party equipment vendors that offer integrated leasing, asset management, and supply chain optimization through our proprietary business processes and software.
Moving onto our intellectual property portfolio, in our litigation against Lawson Software, we have filed a motion seeking a finding that Lawson is in contempt of the injunction ordering it to stop selling, servicing, maintaining, training or installing its infringing products. We anticipate that an evidentiary hearing on our motion will be held the week of February 27, 2012, and oral arguments will be held the end of April 2012.
Turning to our cash position, we continue to deploy our cash to enhance shareholder value. During the quarter, our cash balance increased 19% from last quarter, to $54.1 million, and we amended the share repurchase plan to authorize additional repurchases of up to 500,000 shares from November 15, 2011 through September 15, 2012. Over the past nine months, including some shares authorized in the latest plan, we have repurchased approximately 705,000 shares.
We have also continued to invest our cash in higher returning initiatives, such as increased staffing and solutions, leases, paying vendors quickly for additional discounts, and acquisitions. We are confident in our ability to continue to execute on all of our initiatives, and excited about our strategic expansion plans. Our value-added solutions focus, strong balance sheet and seasoned management team enable us to continue to gain market share.
Now I would like to turn the call over to Elaine Marion, our CFO, who will discuss the detailed financial results, and I will return to answer questions at the end of the call.
Elaine D. Marion, Chief Financial Officer
Thanks, Phil. I would like to review the consolidated financial results followed by our segment breakdown.
As Phil has described, our revenue trends have remained favorable. On a consolidated basis revenues totaled $272.6 million, an increase of $42.6 million or 18.5% compared to $230 million in the same quarter last fiscal year.
Net earnings increased 15.8% to $8.7 million or $1.10 per diluted share as compared to $7.5 million or $0.89 per diluted share in the same quarter last fiscal year.
On a sequential basis, revenues increased 3.7% and net earnings increased 23.8% as a result of the gross margin expansion and increased volume of sales of products and services and sales of leases and notes during the quarter.
As for our two business segments, in our technology sales segment, revenues for the third quarter were $262.6 million, an increase of $41.7 million or 18.9% as compared to $220.9 million in the prior year's quarter.
The increase in revenue is attributable to three elements, each representing about a third of the increase. First, increased organic demand from current and net new customers from our existing sales platform. Second, new customers and services resulting from the investments we made in the past twelve months including acquisitions, new hires, and building new branches and, third, a change in revenue recognition guidance for multiple element arrangements from products and services which was effective April 1, 2011. This change is for products that were delivered during the quarter and were sold together with services. Previously we were required to defer this type of revenue until the services were complete.
The gross margin on products and services declined to 14.8% as compared to 15.5% in the same quarter last year and was affected by the mix between products and services, vendor incentives earned and competitive pricing pressure, as Phil noted earlier.
In the past three years our gross margin has ranged from 13.5% to 15.5% and is subject to change due to competitive market variables, constantly changing vendor incentive programs, vendor mix, and the mix between products and services that we sell.
Salaries and benefits expense increased $3.8 million to $22.9 million compared to $19.1 million during the three months ended December 31, 2010. This increase was driven by a larger number of employees, and increases in commission expense as a result of a larger amount of gross profit.
The technology sales business segment had 698 employees as of December 31, 2011, an increase of 69 employees from 629 employees at December 31, 2010. Substantially all of the increase relates to sales, marketing, and engineering personnel who are customer facing and revenue generating.
General and administrative expenses increased $1.2 million or 36.0% partially due to the acquisitions of NCC & ITI as well as higher travel and other expenses associated with the increase in sales and support personnel.
Professional and other fees decreased 23.7% to $2.5 million compared to $3.3 million during the three months ended December 31, 2010, primarily due to a reduction in legal and other fees related to the patent infringement litigation.
As a result, technology sales segment earnings before taxes increased 3% to $10.4 million for the three months ended December 31, 2011 compared to $10.1 million in the prior year.
Now moving to our financing business segment, total revenues in this segment increased $900,000 or 9.9% to $10 million for the three months ended December 31, 2011, as compared to the prior year. This increase was due to an increase in the net gain on sales of leases, and notes, and an increase in other lease income, partially offset by a decrease in earnings from our lease portfolio, as a number of leases were added during the month of December which did not significantly contribute to the earnings in the quarter. At December 31, 2011, we had $120.3 million of investment in leases compared to $123.1 million at December 31, 2010.
Non-recourse notes payable decreased 32.7% to $23.4 million at December 31, 2011, as compared to $34.8 million at December 31, 2010. The non-recourse debt is generally recourse to the lessee and the underlying leased equipment and not to ePlus.
As a result, segment earnings before tax increased $800,000 or 25.7% to $4.1 million for the three months ended December 31, 2011.
Moving on to the balance sheet, as of December 31, 2011, stockholders’ equity was $216.5 million or $26.98 per share. The total cash and cash equivalents were $54.1 million as compared to $75.8 million on March 31, 2011.
We continue to take advantage of our strong balance sheet by repurchasing our common stock, making acquisitions, and utilizing early pay discounts from vendors. For the nine months ended December 31, 2011, we repurchased approximately 705,000 shares of our outstanding common stock at an average cost of $25.68 per share for a total purchase price of $18.1 million.
It needed, we can increase our liquidity several ways. We can discontinue our stock repurchase program, stop paying vendors early, begin funding leases with non recourse debt, or sell leases. We also have excess borrowing capacity in our financing arrangement with GE Commercial Distribution Finance.
In conclusion, we will continue to use our financial strength to grow our platform through acquisitions, hiring of talented people, and expanding our offerings to meet the needs of our customers. We will continue to execute on our strategic vision, which includes extending our geographical presence, and improving our advanced technology solutions offerings through the opportunities that have developed as a result of the actions we have taken. We are confident that these investments will help us achieve our strategic objectives over the long-term and enhance shareholder value.
That concludes my remarks, and, operator, we would like to open the call for questions.
Operator:[Operator Instructions]

[Operator Instructions]

We'd like to open the call to questions.

Operator: Thank you. [Operator Instructions] And first on the line we have Nick Morrow with Sidoti & Company.

<Q – Nick Mauro, Sidoti>:Hey guys, how are you doing?

<A>:Hi Nick.

<Q – Nick Mauro>:Just I know there is a lot that goes into the gross margin that could be volatile but what can you attribute the gain from the September quarter to this quarter, say went up – over about percent or so?

<A – Elaine Marion, CFO>:Primarily the mix of the products that we sell between services and products and also the type of products that we sell in addition we also increased our rebase as a percentage of sales

<Q – Nick Mauro>:Okay.

<A – Elaine Marion, CFO >:That’s been different quarter-over-quarter.

<Q – Nick Mauro>:Okay. And then with the VantiCore acquisition what’s kind of the timetable on getting that going and how much of the impact could it have to revenues?

<A – Phil Norton>:Well, they’re relatively small company, they enhance our engineering capabilities in the New England area, we think they’ll be up and running immediately. What impact it will have over time as we’re able to – adding to their customer base and increase sales of our products and services that they don’t offer.

<Q – Nick Mauro>:Okay. And lastly just kind of an outlook into the rest 2012 what’s the demand look like for the IT products?

<A – Phil Norton>:Well, what we’ve seen in the last quarter and our demand has been very high we have some realign the industry has some risk, but hard drives and things of that nature. But in general we don’t really forecast what we’re going to be doing ourselves.

<Q – Nick Mauro>:Okay, all right. Thank you.

Phillip G. Norton[Operator Instructions]. And next in line we have Gregg Hillman with First Wilshire Securities Management.

<Q – Gregg Hillman—First Wilshire>:Yeah, good morning. Yeah, could you talk, previous sales, your sales line what percentage of that is reoccurring?

<A—Elaine Marion>:We don’t break that out.

<Q – Gregg Hillman>:Okay. When you sell a piece of equipment like this, you normally have like a service contract with it?

<A—Elaine Marion>:We sell a lot Cisco SMARTnet which has maintenance contract with it, yes as far as our internal Managed Services, we’re really starting to ramp that up and put a lot of focus on that but we don’t break that out as far as percentage of the sales.

<Q – Gregg Hillman>:Okay and when you say internal Managed Services would that fall into like the 4% the professional revenue or professional fees or does that fall in the sales line?

<A—Elaine Marion>:It falls in sales of products and services.

<Q – Gregg Hillman>:Okay and in terms of this offering for Managed Services, I mean do you own server farms yourself and provide that service?

<A—Phil Norton>:You said server farms?

<Q – Gregg Hillman>:Yeah, do you own them?

<A—Phil Norton>:We don’t do hosting for clients.

<Q – Gregg Hillman>:I didn’t quite catch that, you said you do own them or?

<A—Phil Norton>:No we do not host servers for clients.

<Q – Gregg Hillman>:Okay, well then can you just explain your strategy for to develop this capability for managed services. I guess you mentioned then in a variety of areas for video security and what not, can you just explain is this normal, is this unique in the industry or is there a bunch of other people that you’re doing, you’re doing the same thing?

<A—Phil Norton>:Basically there is a large number of people in this business whether it’s IBM, all the way down to VantiCore, who we just bought provides managed services. There is very difference in what it offered and we have a system where we provide monitoring that works up and down, reduces cost for people, servers, the management are working or not working as well as storage and we’re adding significant new capabilities quarterly.

<Q – Gregg Hillman>:Okay. But I mean are – is this just a kind of Catch as Cash Can that you’re doing an add-on to some of your existing customers or can you sell that managed services just like a standalone product?

<A—Phil Norton>:Either one.

<Q – Gregg Hillman>:And where would be your addressable market to the United States for managed services?

<A—Phil Norton>:Well, first thing we have to tackle is the addressable market of our customer base, which is around 1500 customers and that’s who our sales people are going after as well as new clients, which would bring on providing those services to them but as far as the addressable market I wouldn’t, its large but I have no numbers.

<Q – Gregg Hillman>:Okay, okay, I’ll get back in queue. Thanks.

<A>:Thanks Gregg.

Operator:[Operator Instructions]. And next in the line we have Brad Evans with Heartland.

<Q – Brad Evans, Heartlant>:Good afternoon.

<A>:Hi, Brad.

<Q – Brad Evans>:Hello, everybody. I was curious, the 19.2% growth rate on the technology solutions side, what was the organic growth rate in the quarter?

<A—Elaine Marion>:I don’t have that broken out Brad; I’ll have to get back to you.

<Q – Brad Evans>:Okay. We can follow up after perhaps. So, it sounds like the, I don’t wan to put words in your mouth but relative to last quarter, it sounds like the tenure of the market has at least stabilized to improve modestly, is that a good way to characterize it?

<A—Elaine Marion>:I would say that’s one of the results in those quarter that customers been continuing to buy at a little faster pace than what that they have in prior quarters. But I also think it’s a number of places that we’ve added and a number of sales people we’ve added and a couple of the acquisitions in the last year which are now starting to produce a lot more revenue and margins. So, I think all-in-all it’s a mix of several things.

<Q – Brad Evans>:Okay. That’s very helpful. I know there is a lot of things going on within the technology sales SBU with the acquisitions and obviously the professional fees and what have you. But the very stout total revenue growth of almost 19%, we only saw about a 3% increase in segment earnings. When do you think we might start to see more operating leverage in that segment as you are able to deliver more of that revenue growth to the operating line?

<A—Phil Norton>:We continue in trying to improve that all the time. I think last quarter we improved it over the quarters before. But as you’re growing and adding new capabilities and services to keep up with the competition, there’s always a delay factor before comes through, but I think that we will continue to drive forward with these acquisitions and the growth that we have been able to do in the past we hope we can do in the future. But a lot of that depends on the market and it’s very competitive.

<Q – Brad Evans>:Got it. So, the investments you’re making organically in Southern California and Texas and Georgia, those are all in there right now?

<A—Phil Norton>:I don’t think we mentioned Georgia.

<Q – Brad Evans>:Okay. All right.

<A—Phil Norton>:They’re all ones that we’re trying to grow and some are growing organically and some we’re growing by acquisitions. And the benefit to the acquisitions is we acquire customers and to the most part the acquisitions we made are either they are centered on one type of technology which enables us to up sell the significant other technologies that we hold in our portfolio. So, over time I think that increases our ability to go wider and deeper into our accounts and be able to get more control over what those accounts are spending.

<Q – Brad Evans>:Okay. Last question from each, the share count for the fourth quarter, should we be using 7.8 million shares, is that right?

<A—Elaine Marion>:Well, we’re continuing our repurchase, so it depends on the market and our plans.

<Q – Brad Evans>:Elaine do you have the share count at the end of the quarter?

<A – Elaine Marion>:At the end of the third quarter?

<Q – Brad Evans>:At the end of the third quarter yes.

<A – Elaine Marion>:I’m sorry, I thought you said fourth quarter that you’re looking for me to project...

<Q – Brad Evans>:No I did though I’ll just ask the question different way if you have the share count at the end of the third quarter that would be helpful?

<A – Elaine Marion>:The diluted it’s 7.9 million actually 8 million round up.

<Q – Brad Evans>:Okay thank you very much.

<A – Elaine Marion>:Yes.

Operator:And we have a follow from Gregg Hillman with First Wilshire.

<Q – Gregg Hillman>:Yeah first of all yeah for litigation against the losses so why is that important enough to mention?

<A – Elaine Marion>:A lot of our investors have been interested in this and it’s been continuing litigation for the past year or so and we have invested considerable amount of our assets in it so that’s why we feel the need to mention it.

<Q – Gregg Hillman>:How much of you’ve invested in it in terms of I guess lawyers?

<A – Elaine Marion>:I think, I’m not sure whether I’ve disclosed that number or not. It’s been going over probably three fiscal years now so.

<Q – Gregg Hillman>:What’s the run rate recently for spending on that thing?

<A – Elaine Marion>:Well it’s decreased on year over year basis last quarter I think we said about 1.5 million down from about 2.3 million or so.

<Q – Gregg Hillman>:You mean the last quarter being your third quarter the September quarter?

<A – Elaine Marion>:Yeah we spent $2.5 million for the three months ended December 31, 2011 but that’s a decrease from $3.3 million in the prior year.

<Q – Gregg Hillman>:Okay and just in terms of, and I just wanted to ask you by the competition for a company, let’s say, like PC Mall, they’re just selling I guess equipment over the Internet to commercial customers. Do they have an advantage versus what you’re doing?

<A—Phil Norton>:I don’t believe so. I think for the most part it’s a disadvantage because we now there is a lower margin unless you can get in there and sell solutions; you can’t increase your margins. And we have a tele sales and business development arm that calls into our account to find new opportunities. But in our opinion that requires a significant amount of infrastructure for our tele sales as well as doing a lot of low margin transactions.

<Q – Gregg Hillman>:Yeah. So, speaking of margins, you mentioned in the call, I think at one point rebates and also less vendor allowances. And can you tell me what’s going on there, the trend, in terms of vendor allowances and also your trends in terms of giving rebates?

<A – Elaine Marion>:This is Elaine. We don’t, we don’t give rebates to our customers. These are manufacture incentives that we receive...

<Q – Gregg Hillman>:Okay.

<A – Elaine Marion>:These programs are very complex and ever changing by the manufacturers. So we don’t have any insight into those programs on a long-term basis and what product or solution set they’re targeting at any one period a time. We do our best to garner as much of those incentives as we can. We have a whole team of people here that monitor and calculate those. So, I feel like we get the most we can, although out of this incentive, but they’re difficult to predict on how they’re going to be changing in the future.

<Q – Gregg Hillman>:Okay. And so, you couldn’t comment about your overall dependence on Cisco as a center whether they can push you around or is that a benefit because it’s hard for other people to get certification to service all their products?

<A—Phil Norton>:Well, as far as pushing us around, I don’t think Cisco has ever dealt with their partners that way. They’re probably the most partner-friendly of the major vendors. They have a lot of focus on helping the partners grow and that we don’t feel like it is a disadvantage for couple of reasons. One, no one really has come out with a viable alternative or unified communications and networks. And so, that’s going to be something that’s be provided for years to come that will not be affected to any degree. We don’t believe in any degree the cloud services. So, it will enable us to have a strong foothold with our customers and also put us in the right position where we can sell our other products and services to those customers. A large part of our managed services is around Cisco and Cisco networks. So, we think in the long run it’s a benefit to us.

<Q – Gregg Hillman>:Okay. Is Cisco growing faster or slower than you?

<A—Phil Norton>:Well, you I don’t own any Cisco stock and we not really follow their trends. We believe that we’re growing a little bit faster.

<Q – Gregg Hillman>:Okay, okay thank you.

Operator:And I’d like to turn over to our speakers for any closing remarks.

Phil Norton, Chairman, President & Chief Executive Officer

We’d like to thank you all for joining us and we appreciate your interest in ePlus.


Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may all disconnect. Everyone have a great day.

Operator:Thank you. Our first question comes from the line of …

Operator:At this time I'm showing no further questions. And I'd like to turn over to our speakers for any closing remarks.

Phillip G. Norton, Chairman, CEO and President
We'd like to thank you very much for taking the time for our conference call. If you have any questions, you can contact Kley Parkhurst. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.

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